##### Table of Contents



UNITED STATES
    SECURITIES AND EXCHANGE COMMISSION
    Washington, D.C. 20549
  FORM 10-KSB
  þ ANNUAL
    REPORT PURSUANT TO SECTION 13 OR 15(d)
 OF THE SECURITIES EXCHANGE ACT OF 1934
    o TRANSITION
    REPORT PURSUANT TO SECTION 13 OR 15(d)
 OF THE SECURITIES EXCHANGE ACT OF 1934
  
  Commission File Number
    001-14053
  Milestone Scientific Inc.
  (Name of Small Business Issuer in its Charter)
  Delaware

13-3545623(State or other jurisdiction of
    incorporation or organization)

(I.R.S. Employer
    Identification No.)      (973) 535-2717
  Securities
    registered under Section 12(b) of the Exchange Act:
    None
  Securities
    registered under Section 12(g) of the Exchange Act:
     o
  þ o
  Regulation S-B Form 10-KSB Form 10-KSB. þ
  o þ
        DOCUMENTS
    INCORPORATED BY REFERENCE None
  o þ
 1




---



##### 



MILESTONE
    SCIENTIFIC INC.
  Form 10-KSB
    Annual Report
  TABLE OF
    CONTENTS
   
 PagePART IItem 1.


Description of Business


3Item 2.


Description of Property


14Item 3.


Legal Proceedings


14Item 4.


Submission of Matters to a Vote of Security
    Holders


14PART IIItem 5.


Market for Common Equity, Related Stockholder
    Matters and Small Business Issuer Purchases Of Equity
    Securities


14Item 6.


Managements Discussion and Analysis or Plan
    of Operation


16Item 7.


Financial Statements


24Item 8.


Changes in and Disagreements With Accountants on
    Accounting and Financial Disclosure


24Item 8A.


Controls and Procedures


24PART IIIItem 9.


Directors, Executive Officers, Promoters and
    Control Persons and Corporate Governance; Compliance with
    Section 16 (a) of the Exchange Act


26Item 10.


Executive Compensation


28Item 11.


Security Ownership of Certain Beneficial Owners
    and Management and Related Stockholder Matters


31Item 12.


Certain Relationships and Related Transactions,
    and Director Independence


34Item 13.


Exhibits


34Item 14.


Principal Accountant Fees and Services


35SIGNATURES


37EXHIBITSEX-10.11: EMPLOYMENT AGREEMENTEX-10.12: EMPLOYMENT AGREEMENTEX-23.1: CONSENT OF HOLTZ RUBENSTEIN REMINICK LLPEX-23.2: CONSENT OF EISNER LLPEX-31.1: CERTIFICATIONEX-31.2: CERTIFICATIONEX-32.1: CERTIFICATIONEX-32.2: CERTIFICATION    FORWARD-LOOKING
    STATEMENTS
  Certain statements made in this Annual Report on
    Form 10-KSB
    are forward-looking statements (within the meaning
    of the Private Securities Litigation Reform Act of
    1995) regarding the plans and objectives of management for
    future operations. Such statements involve known and unknown
    risks, uncertainties and other factors that may cause actual
    results, performance or achievements of Milestone to be
    materially different from any future results, performance or
    achievements expressed or implied by such forward-looking
    statements. The forward-looking statements included herein are
    based on current expectations that involve numerous risks and
    uncertainties. Milestones plans and objectives are based,
    in part, on assumptions involving the continued expansion of
    business. Assumptions relating to the foregoing involve
    judgments with respect to, among other things, future economic,
    competitive and market conditions and future business decisions,
    all of which are difficult or impossible to predict accurately
    and many of which are beyond the control of Milestone. Although
    Milestone believes that its assumptions underlying the
    forward-looking statements are reasonable, any of the
    assumptions could prove inaccurate. In light of the significant
    uncertainties inherent in the forward-looking statements
    included herein, particularly in view of Milestones early
    stage operations, the inclusion of such information should not
    be regarded as a representation by Milestone or any other person
    that the objectives and plans of Milestone will be achieved. We
    undertake no obligation to revise or update publicly any
    forward-looking statements for any reason.
 2




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##### Table of Contents



PART I  Item 1.
    Description
    of Business  CompuDent® CompuMed® CompuFlo®,
    The
    Wand® The Wand
    Plus® The
    SafetyWand® Cool Blue
    Wand® Cool Blue Tooth Whitening
    System tm ® STA tm Single Tooth Anesthesia Ionic
    White® Ionic
    White tm
  BUSINESS
  Background
    The
    Wand® CompuDent® Wand CompuDent CompuDent
  CompuMed®
  CompuFlo® CompuFlo CompuDent CompuMed Dynamic Pressure
    Sensing® Dynamic Pressure Sensing
  CompuFlo In Situ
 3




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##### Table of Contents



CompuFlo CompuFlo 150-year-old
  CompuFlo and/or
  CompuFlo
  CompuFlo CompuFlo
  STA tm CompuFlo STA System STA System STA System
    CompuFlo®
    Advanced Injection Technology  Core
    Technology
  CompuFlo® CompuFlo CompuFlo
  CompuFlo.
   4




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##### Table of Contents



CompuFlo CompuFlo
  CompuFlo
  CompuFlo
  CompuFlo STA System CompuDent® CompuFlo STA Systems CompuDent CompuMed
  Product
    Platform
    CompuDent®
  CompuDent Wand
    Plus® CompuDent CompuDent The
    Wand®
  
    CompuDent minimizes the pain associated with palatal, mandibular
    block and all other injections, resulting in a more comfortable
    injection experience for the patient;
    the pencil grip used with The Wandhandpiece allows
    unprecedented tactile sense and accurate control;
    new injections made possible with the CompuDenttechnology eliminate collateral numbness of the tongue, lips
    and facial muscles;
    bi-directional rotation of The Wandhandpiece eliminates
    needle deflection resulting in greater success and more rapid
    onset of anesthesia in mandibular block injections;
    the use of a single patient use, disposable handpiece minimizes
    the risk of cross contamination; and
    the ergonomic design of The Wandhandpiece makes an
    injection easier and less stressful to administer, lowering the
    risk of carpal tunnel syndrome. 5




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##### Table of Contents



CompuDents and/or CompuDent 150-year
  STA tm System
  STA (Single Tooth Anesthesia) System CompuFlo CompuDent CompuDent STA System
  CompuMed®
  CompuMed CompuDent. CompuMed CompuMed
  The
    Wand®
  Wand STA
    System CompuDent CompuMed P-ASA The Wand
  The
    SafetyWand®
  SafetyWand SafetyWand The SafetyWand
 6




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##### Table of Contents



SafetyWand SafetyWand SafetyWand
  Tooth
    Whitening Products
  The Cool Blue
    Wand® Ionic
    White®
  The Cool
    Blue Tooth Whitening
    System tm
  Cool Blue Tooth Whitening System Cool Blue
  Ionic
    White®
  Ionic White Ionic White and/or
  Competition
    STA System STA System
   7




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##### Table of Contents



Patents
    And Intellectual Property
    U.S.


DATE OFNUMBER


ISSUEComputer Controlled Drug Delivery SystemsHypodermic Anesthetic Injection Method


4,747,824



5/31/1988Hypodermic Anesthetic Injection Apparatus & Method


5,180,371



1/19/1993(CompuFlo, CompuMed, and CompuDent)Dental Anesthetic and Delivery Injection Unit


6,022,337



2/8/2000Design for a Dental Anesthetic Delivery System Holder


D422,361



4/4/2000Design for a Dental Anesthetic Delivery System Housing


D423,665



4/25/2000Design for a Dental Anesthetic Delivery System Handle


D427,314



6/27/2000Dental Anesthetic Delivery Injection Unit


6,132,414



10/17/2000Dental Anesthetic Delivery Injection Unit


6,152,734



11/28/2000Disposable Needle and Anesthetic Carrier Assembly


6,296,623



10/2/2001Dental Anesthetic and Delivery Injection Unit with Automated
    Rate Control


6,652,482



11/25/2003Pressure/Force Computer Controlled Drug Delivery System


6,200,289



3/13/2001Pressure/Force Computer Controlled Drug Delivery System with
    Exit Pressure


6,786,885



9/17/2004Pressure/Force Computer Controlled Drug Delivery System with
    Automated Charging


6,887,216



5/3/2005Drug Delivery System with Profiles


6,945,954



9/20/2005Cartridge Holder for Anesthetic and Delivery Injection Device


D558,340



12/25/2007Engineered Sharps Injury Protection DevicesHandpiece for Injection Device with a Retractable and Rotating
    Needle


6,428,517



8/6/2002Safety IV Catheter Device


6,726,658



4/27/2004Safety IV Catheter Infusion Device


6,905,482



6/14/2005Handpiece for Injection Device with a Retractable and Rotating
    Needle


6,966,899



11/22/2005OtherHypodermic Syringe and Method


4,877,934



12/19/1988Apparatus and Method for Sterilizing, Destroying and
    Encapsulating Medical Implement Wastes


4,992,217



2/12/1991Apparatus and Method for Verifiably Sterilizing Destroying and
    Encapsulating Regulated Medical Wastes


5,078,924



1/7/1992Apparatus and Method for Verifiably Sterilizing, Destroying and
    Encapsulating Regulated Medical Wastes


5,401,444



3/28/1995Self-Sterilizing Hypodermic Syringe and Method


5,512,730



4/30/1996Self-Sterilizing Hypodermic Syringe and Method


5,693,026



12/2/1997    8




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##### Table of Contents



CompuFlo CompuFlo
    CompuFlo
  CompuDent
  STA tm CompuDent® tm ® ®
  and/or inter alia STA tm Compudent tm
 9




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##### Table of Contents



Government
    Regulation
  CompuDent CompuMed Safety Wand STA System
     10




---



##### Table of Contents



CompuDent Safety Wand CompuMed
      and/or
  STA System Safety Wand The Wand CompuDent
  Product
    Liability
    Employees
   11




---



##### Table of Contents



CERTAIN
    RISK FACTORS THAT MAY AFFECT GROWTH AND PROFITABILITY
    We have
    no history of profitable operations. Continuing losses could
    exhaust our capital resources and force us to discontinue
    operations.
      We cannot
    become successful unless we gain greater market acceptance for
    our products and technology.
  CompuDent STA SafetyWand CompuMed CompuFlo CompuDent
  Our
    limited distribution channels must be expanded for us to become
    successful.
    We depend
    on three principal manufacturers. If we cannot maintain our
    existing relationships or develop new ones, we may have to cease
    our operations.
  STA CompuDent CompuMed
 12




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##### Table of Contents



STA, CompuDent CompuMed
  We may be
    subject to product liability claims that are not fully covered
    by our insurance and that could put us under financial
    strain.
    We rely
    on the continuing services of our Chairman , Chief Executive
    Officer and Director of Clinical Affairs.
    The
    market price of our common stock has been volatile and may
    continue to fluctuate significantly because of various factors,
    some of which are beyond our control.
    We are
    controlled by a limited number of shareholders.
    Future
    sales or the potential for sale of a substantial number of
    shares of our common stock could cause the trading price of our
    common stock and warrants to decline and could impair our
    ability to raise capital through subsequent equity
    offerings.
   13




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##### Table of Contents



Implementation
    of procedures to comply with the Sarbanes-Oxley Act and SEC
    rules concerning internal controls may be so costly that
    compliance could have an adverse effect on us.
  Internal Control-Integrated
    Framework
  Item 2.
    Description
    of Property      Item 3.
    Legal
    Proceedings  Single Tooth Anesthesia (STA) CompuDent STA CompuDent
  Item 4.
    Submission
    of matters to a Vote of Security Holders   PART II  Item 5.
    Market
    for Common Equity and Related Stockholder Matters and Small
    Business Issuer Purchases of Equity Securities  Market
    Information
  mark-up,
 14




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##### Table of Contents



Common
    Stock
    HIGH


LOW2007First Quarter

$
3.62


$
1.12Second Quarter

$
2.90


$
1.52Third Quarter

$
2.49


$
1.55Fourth Quarter

$
2.50


$
1.552006First Quarter

$
1.64


$
1.00Second Quarter

$
1.25


$
.81Third Quarter

$
1.50


$
.80Fourth Quarter

$
1.40


$
.90   Warrants
    HIGH


LOW2007First Quarter

$
.70


$
.22Second Quarter

$
.60


$
.30Third Quarter

$
.45


$
.25Fourth Quarter

$
.79


$
.252006First Quarter

$
.35


$
.21Second Quarter

$
.40


$
.11Third Quarter

$
.25


$
.11Fourth Quarter

$
.30


$
.16   Holders
    Dividends
      Sales of
    Unregistered Securities
     15




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##### Table of Contents



ITEM 6.
    Managements
    Discussion and Analysis or Plan of Operation.  Form 10-KSB.
  OVERVIEW
    
    optimize our tactical approach to product sales and marketing in
    order to increase penetration of the global dental and medical
    markets with our proprietary, patented Computer-Controlled Local
    Anesthesia Delivery (CCLAD) solutions; and
    identify and pursue strategic collaborations with third parties
    to jointly develop new products utilizing our CompuFlopressure force technology for novel, new dental and medical
    applications.        STA CompuDent
  STA System STA
  ramp-up STA
 16




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##### Table of Contents



STA
    System STA System
  STA rd STA Systems tm STA System
  STA
    System
  CompuFlo CompuFlo CompuFlo
  CompuFlo
  CompuFlo
  STA System CompuDent STA System
  CompuFlo
 17




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##### Table of Contents



Twelve Months Ended December 31,2007


2006DOMESTICCompuDent

$
440,383



9.6
%

$
968,821



23.4
%STA Units


1,154,435



25.1
%






0.0
%Handpieces


2,824,383



61.5
%


2,998,906



72.3
%STA Handpieces


149,375



3.3
%






0.0
%Other


25,080



0.5
%


179,553



4.3
%Total Domestic

$
4,593,656



100.0
%

$
4,147,280



100.0
%INTERNATIONALCompuDent

$
277,847



16.6
%

$
492,871



34.7
%STA Units


164,842



9.9
%






0.0
%Handpieces


1,148,616



68.8
%


816,735



57.6
%STA Handpieces


52,916



3.2
%






0.0
%Other


24,732



1.5
%


109,539



7.7
%Total International

$
1,668,952



100.0
%

$
1,419,145



100.0
%DOMESTIC/INTERNATIONAL ANALYSISDomestic

$
4,593,656



73.4
%

$
4,147,280



74.5
%International


1,668,952



26.6
%


1,419,145



25.5
%Total Product Sales

$
6,262,608



100.0
%

$
5,566,425



100.0
%       Current
    Product Platform
    
    STAtmSystem In February of 2007, Milestone
    introduced to market the STA System, a patented CCLAD
    system that incorporates the pressure force feedback
    elements of Milestones patented CompuFlotechnology, thereby allowing dentists to administer
    injections accurately and painlessly into the periodontal
    ligament space, effectively anesthetizing a single tooth. The
    STA Systemis also capable of performing all of the
    injections that can be done with a conventional dental syringe,
    including the palatal- 18




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##### Table of Contents



anterior superior alveolar, anterior middle superior alveolar
    and inferior alveolar nerve block. The STA Systemachieves all of these injections predictably and reliably
    including the Periodoncal-Intraligamentary injection (Single
    Tooth Anesthesia) that provides an almost immediate onset of
    profound anesthesia to a single tooth. Milestone received FDA
    510(k) Pre-market Notification acceptance in August 2006. The
    STA Systemhas been the subject of numerous articles
    published in leading trade magazines, dental journals and online
    blogging sites since its market introduction early in 2007. In
    July, noted industry publication Dentistry Today featured
    the STA Systemas one of the Top 100 Products in
    2007, helping to promote much broader recognition of the
    instrument and validating STAs value proposition
    for dentists and patients, alike.  
    CompuDent® CompuDentwas distinguished by
    Dentaltown Magazineas the winner of a 2006 Townie
    Choice Award, CompuDentis Milestones
    proprietary, patented computer-controlled local anesthetic
    delivery system which delivers anesthesia at a precise and
    consistent rate below a patients pain threshold.
    CompuDenthas been widely heralded as a revolutionary
    device, considered one of the major advances in dentistry of the
    Twentieth Century and favorably evaluated in approximately 50
    peer reviewed or independent clinical research reports.
    CompuDentis the predecessor device to the STA
    System.
    CompuMed® CompuMedis a patented
    computer-controlled injection system geared to the needs of the
    medical market and providing benefits similar to CompuDent.
    CompuMedallows many medical procedures, now requiring
    Intravenous sedation, to be performed with only local anesthesia
    due to dramatic pain reduction. Also, dosages of local
    anesthetic can often be significantly reduced, thus reducing
    side effects, accelerating recovery times, lowering costs and
    eliminating potential complications. CompuMedis now
    gaining growing clinical evidence demonstrating benefits from
    use in colorectal surgery; podiatry; dermatology, including
    surgery for the removal of basal cell carcinomas and other
    oncological dermatologic procedures; nasal and sinus surgery,
    including rhinoplasty; hair transplantation and plastic surgery,
    among others.
    The
    Wand® 
    Used in conjunction with the STA, CompuDentor
    CompuMedsystems, The Wandis an ergonomically
    designed and patented handpiece that enables all traditional and
    newer injections, such as AMSA, P-ASA and Modified-PDL, to be
    more comfortable and easier to deliver. Moreover, the pen-like
    grasp of The Wandallows bi-directional rotation during
    injection, which prevents needle deflection that can occur with
    a traditional syringe. A straighter path results in a more
    accurate injection, meaning fewer missed blocks, and more rapid
    onset of anesthesia.
    The
    SafetyWand® 
    The Safety Wandwas the first, patented safety-engineered
    injection device that conforms to standards while also meeting
    the clinical needs of dental and medical practitioners. The
    Federal Needlestick Prevention Act (U.S.) has mandated the use
    of products with engineered safety injury protection
    to eliminate accidental needle sticks, thus providing Milestone
    with an invaluable marketing platform to position The
    SafetyWandas a powerful and capable alternative to
    traditional injection devices. The SafetyWandwas the
    first patented injection device to be fully compliant with OSHA
    regulations under the Act.  The Cool Blue
    Wand ® Ionic
    White ®
  
    The Cool Blue Tooth Whitening
    Systemtm 
    a proprietary dental enhancement system that uses blue light
    emitting diodes for fast curing of dental composite materials,
    trans-illumination of teeth and activation of whitening gels and
    pastes. In 2006, Milestone encountered several problems with the
    Cool Blue system. The chemical properties of the whitening
    agents became difficult to manage in the manufacturing process
    and, therefore, required refrigeration. Moreover, the Company
    determined that there were complications with the intellectual
    property surrounding the system. In 2007, the Company chose to
    vacate commercialization of the product given the costs
    associated with resolving these technical and legal issues and
    the number of competitors already established in the
    professional teeth whitening market. 19




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
    Ionic
    White® 
    Ionic White is a proprietary, technologically advanced
    light-activated teeth whitening system developed for consumer
    use in the home. Ionic White whitens and brightens all tooth
    surfaces within approximately 21 minutes in an easy-to-use home
    kit that includes a unique cool blue intra-oral
    light and proprietary gel. The system provides an alternative to
    costly and time-consuming trips to the dentist
    and/or other
    over-the-counter
    products that do not offer the same benefits as the Ionic White
    system. Milestone has licensed this product exclusively to
    United Systems, Inc., a California company and receives
    royalties on sales.  Technology
    Rights
  SafetyWand CompuFlo CompuDent
  Summary
    of Critical Accounting Policies and Significant Judgments and
    Estimates
      Accounts
    Receivable
    Inventories
  (first-in,
  Impairment
    of Long-Lived Assets
   20




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##### Table of Contents



Revenue
    Recognition
  set-up
    Results
    of Operations
  STA System CompuFlo
    Twelve Months EndedDecember 31, 2007


December 31, 2006Products sales, net

$
6,262,608



98
%

$
5,566,425



95
%Royalty income


128,105



2
%


277,752



5
%Total revenue


6,390,713



100
%


5,844,177



100
%Cost of products sold


2,898,048



45
%


3,002,615



51
%Royalty expense






0
%


33,031



1
%Total cost of revenue


2,898,048



45
%


3,035,646



52
%Gross Profit


3,492,665



55
%


2,808,531



48
%Selling, general and administrative expenses


6,335,556



100
%


5,326,032



91
%Research and development expenses


397,354



6
%


1,005,285



17
%Operating expenses


6,732,910



106
%


6,331,317



108
%Loss from operations


(3,240,245
)


(51
)%


(3,522,786
)


(60
)%Other income


301,549



5
%


370,518



6
%Net loss

$
(2,938,696
)


(46
)%


(3,152,268
)


(54
)%   Year
    ended December 31, 2007 compared to year ended
    December 31, 2006
  STA STA STA System CompuDent STA CompuDent CompuDent CompuDent STA
 21




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CompuDent System STA
    System
  Ionic
    White tm
  SafetyWand
  STA System
  STA
  CompuFlo
             22




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Liquidity
    and Capital Resources
                Recent
    Accounting Pronouncements
     23




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##### Table of Contents



Accounting for Certain Hybrid Financial
    Instruments  an amendment of FASB Statement
    No. 133 and 140
  The
    Fair Value Option for Financial Assets and Financial
    Liabilities  Including an amendment of FASB Statement
    No. 115.
  Summary No. 141 (revised 2007),
  Non-controlling Interests in Consolidated Financial
    Statements  and amendment of ARB
    No. 51.
  Item 7.
    Financial
    Statements  page F-1.
  Item 8.
    Change
    in and Disagreements with Accountants on Accounting and
    Financial Disclosure    Item 8A
    (T).
    Controls and Procedures  Rules 13a-15(e) 15d-15(e))
 24




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##### Table of Contents



Managements
    Annual Report on Internal Control Over Financial
    Reporting
    
    pertain to the maintenance of records that, in reasonable
    detail, accurately and fairly reflect the transactions and
    dispositions of our assets;
    provide reasonable assurance that transactions are recorded as
    necessary to permit preparation of our financial statements in
    accordance with generally accepted accounting principles in the
    United States, and that our receipts and expenditures are being
    made only in accordance with authorizations of our management
    and directors; and
    provide reasonable assurance regarding prevention or timely
    detection of unauthorized acquisition, use or disposition of our
    assets that could have a material effect on the financial
    statements.    Internal Control  Integrated
    Framework
      Item 8B.
    Other
    Information   25




---



##### Table of Contents



PART III  Item 9.
    Directors,
    Executive Officers, Promoters, Control Persons and Corporate
    Governance; Compliance With Section 16 (a) of the
    Exchange Act.    NAME

AGE

POSITION

DIRECTOR SINCELeonard A. Osser


60


Chairman


1991Joe W. Martin


55


Chief Executive Officer


2008Joseph DAgostino


56


Acting Chief Financial OfficerPablo F. Serna C


32


Director


2006Leonard M. Schiller(1)(2)


66


Director


1997Jeffrey Fuller(1)(2)


62


Director


2003Leslie Bernhard(1)


63


Director


2003     (1)
    
    Member of the Audit Committee(2)
    
    Member of the Compensation Committee  Key
    Personnel
    NAME

AGE

POSITIONEugene Casagrande, D.D.S.


64


Director of Professional RelationsMark Hochman, D.D.S.


50


Director of Clinical AffairsRobert A. Presutti


55


Vice President of Sales and Marketing              26




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Sonicare start-up
         27




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##### Table of Contents



1999-2001,
  Regulation S-B.
  Section 16(a)
    Beneficial Ownership Reporting Compliance
      Code of
    Ethics
  www.milesci.com.
  Item 10.
    Executive
    Compensation.  Regulation S-B,
 28




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##### Table of Contents



SUMMARY
    OF COMPENSATION TABLE
  OTHER


OPTIONNAME AND PRINCIPAL POSITION

YEAR


SALARY


BONUSES


COMPENSATION


AWARDS


TOTALLeonard A. Osser


2007


$
300,000
(1)






16,660
(1)





$
316,660Chairman


2006


$
300,000
(1)






15,237
(1)





$
315,237Joe W. Martin


2007


$
184,483


$
80,000



909






$
265,392Chief Executive Officer


2006


$
















Thomas R. Ronca


2007


$
162,406
(2)











(3)

$
162,406President and Chief Operating Officer


2006


$
192,970
(2)









$
10,844
(3)

$
203,814         Form 10-KSB.
  Employment
    Contracts
         29




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Objective
    of Our Executive Compensation Program
      and/or
      Outstanding
    Equity Awards at December 31, 2007
    Option AwardsNumber ofSecuritiesUnderlyingUnexercised


Option


OptionOptions


Exercise


ExpirationName

Exercisable


Price($)


DateLeonard Osser


16,667
(1)


0.87



1/1/2008     (1)
    
    Fully vested on 7-1-06  Compensation
    of Directors
   30




---



##### Table of Contents



Director
    Compensation
  Name

Option Awards(1)


TotalLeonard M. Schiller

$
22,200
(2)

$
22,200Jeffrey Fuller

$
22,200
(2)

$
22,200Leslie Bernhard

$
22,200
(2)

$
22,200Pablo F. Serna C.

$
22,200
(2)

$
22,200         Item 11.
    Security
    Ownership of Certain Beneficial Owners and Management and
    Related Stockholder Matters    Shares ofCommon StockBeneficially


Percentage ofName of Beneficial Owner (1)

Owned(2)


OwnershipExecutive Officers and DirectorsLeonard Osser


1,465,406
(3)


12.53
%Joe W. Martin






*Joseph DAgostino






*Leonard M. Schiller


93,228
(4)


*F. Pablo Serda C.


30,000
(5)Jeffrey Fuller


76,667
(6)


*Leslie Bernhard


66,667
(7)


*All directors & executive officers as a group
    (7 persons)


1,731,968



14.81
%K. Tucker Andersen


1,483,969
(8)


12.68
%     *
    
    Less than 1%  c/o Cumberland
 31




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##### Table of Contents



Securities
    Authorized for Issuance Under Equity Compensation
    Plans
  Equity
    Compensation Plan Information
    Number of Securities (1)


Weighted-average


Number of securities (1)to be issued upon exercise of


exercise


remaining available foroutstanding options and


price of outstanding


future issuance underwarrants


options and warrants


equity compensation planEquity compensation plan approved by stockholders(1)Grants under our 1997 Stock Option Plan


129,334


$
2.84



177,999Grants under our 2004 Stock Option Plan


262,000



1.16



178,000Equity compensation plan not approved by stockholders(2)Aggregate individual option and warrant grants


2,967,079



4.45



Not applicableTotal


3,358,413



4.13  32




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##### Table of Contents



Stock
    Plan
        
    for consulting services, 17,493 shares valued at
    $20,250; and
    as part of annual compensation and severance, 80,596 shares
    valued at $85,583 were issued to three employees and two former
    employees.   33




---



##### Table of Contents



Item 12.
    Certain
    Relationships and Related Transactions and Director
    Independence  Regulation S-B
  Director
    Independence
      Item 13.
    Exhibits  Exhibits
    EXHIBITNO.

DESCRIPTION3
.1

Certificate of Incorporation of Milestone(1)3
.2

Certificate of Amendment filed July 13, 1995(2)3
.3

Certificate of Amendment filed December 6, 1996(3)3
.4

Certificate of Amendment filed December 17, 1997(4)3
.5

Certificate of Amendment filed July 23, 2003(6)3
.6

Certificate of Amendment filed January 8, 2004.(6)3
.7

Certificate of Designation filed January 15, 2004(6)3
.8

By-laws of Milestone(1)4
.1

Specimen stock certificate(2)4
.2

Intentionally Left Blank4
.3

Form of warrant agreement, including form of warrant(8)10
.1

Lease dated November 25, 1996 between Livingston Corporate
    Park Associates, L.L.C. and Milestone(3)10
.2

Agreement with DaVinci Systems dated July 30, 2003(6)10
.3

Agreement with Strider dated September 3, 2003(6) 34




---



##### Table of Contents



EXHIBITNO.

DESCRIPTION10
.4

Agreement with Len Osser and K. Tucker Andersen, dated
    October 9, 2003(6)10
.5

Agreement with Morse, Zelnick, Rose & Lander dated
    December 22, 2003(6)10
.6**

Employment Agreement with Leonard Osser dated December 20,
    2003(6)10
.7

Agreement with United Systems dated October 20, 2004(9)10
.8

Agreement with Mark Hochman dated as of January 1, 2005(9)10
.9

Lease amendment dated April 28, 2004 between Livingston
    Corporate Park Associates, L.L.C. and Milestone(9)10
.10

Agreement with DaVinci regarding exclusive license over patented
    products dated June 1, 2004(10)10
.11**

Employment Agreement with Leonard Osser dated January 1,
    2008*10
.12**

Employment Agreement with Joe W. Martin dated May 2, 2007*14


Code of Ethics(7)23
.1

Consent of Holtz Rubenstein Reminick LLP*23
.2

Consent of Eisner LLP*31
.1

Rule 13a-14(a)
    Certifications  Chief Executive Officer*31
.2

Rule 13a-14(a)
    Certifications  Chief Financial Officer*32
.1

Section 1350 Certifications Chief Executive
    Officer*32
.2

Section 1350 Certifications Chief Financial
    Officer*     *
    
    Filed herewith.**
    
    Indicates management contract or compensatory plan or arrangement(1)
    
    Incorporated by reference to Milestones Registration
    Statement on Form SB-2
    No. 33-92324.(2)
    
    Incorporated by reference to Amendment No. 1 to
    Milestones Registration Statement on
    Form SB-2
    No. 333-92324.(3)
    
    Incorporated by reference to Milestones
    Form 10-KSB
    for the year ended December 31, 1996.(4)
    
    Incorporated by reference to Milestones
    Form 10-KSB
    for the year ended December 31, 1999.(5)
    
    Incorporated by reference to Milestones Registration
    Statement on Form
    S-2
    No. 333-110376,
    Amendment No. 1.(6)
    
    Incorporated by reference to Milestones Registration
    Statement on Form
    S-2
    No. 333-110376,
    Amendment No. 3.(7)
    
    Incorporated by reference to Milestones
    Form 10-KSB
    for the year ended December 31, 2003.(8)
    
    Incorporated by reference to Milestones Registration
    Statement on Form
    S-2
    No. 333-110367,
    Amendment No. 5.(9)
    
    Incorporated by reference to Milestones
    Form 10-KSB
    for the year ended December 31, 2004.(10)
    
    Incorporated by reference to Milestones
    Form 10-KSB
    for the year ended December 31, 2005.  Item 14.
    Principal
    Accountant Fees and Services  Audit
    Fees
   35




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##### Table of Contents



Audit
    Related Fees
  Forms S-3 S-8
  Tax
    Fees
    All Other
    Fees
    Audit
    Committee Administration of the Engagement
    Audit
    Committee Pre-Approval Policies and Procedures
   36




---



##### Table of Contents



SIGNATURES      By:
    /s/  Joe
    W. Martin         Signature

Date

Title/s/  Joe
    W. MartinJoe
    W. Martin

March 31, 2008

Chief Executive Officer/s/  Joseph
    DAgostinoJoseph
    DAgostino

March 31, 2008

Acting Chief Financial Officer/s/  Leonard
    OsserLeonard
    Osser

March 31, 2008

Director/s/  Leonard
    SchillerLeonard
    Schiller

March 31, 2008

Director/s/  Jeffrey
    FullerJeffrey
    Fuller

March 31, 2008

Director/s/  Leslie
    BernhardLeslie
    Bernhard

March 31, 2008

Director/s/  Pablo
    F. Serna C.Pablo
    F. Serna C.

March 31, 2008

Director  37




---



##### 



INDEX TO
    FINANCIAL STATEMENTS
   
 PageReport of Independent Registered Public
    Accounting Firm


F-2Report of Predecessor Independent Registered
    Public Accounting Firm


F-3Balance Sheet as of December 31, 2007


F-4Statements of Operations for the years ended
    December 31, 2007 and 2006


F-5Statements of Changes in Stockholders
    Equity for the years ended December 31, 2007 and 2006


F-6Statements of Cash Flows for the years ended
    December 31, 2007 and 2006


F-7Notes to Financial Statements


F-8   F-1




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##### Table of Contents



Report of
    Independent Registered Public Accounting Firm             Holtz
    Rubenstein Reminick LLP
    F-2




---



##### Table of Contents



Report of
    Independent Registered Public Accounting Firm             Eisner
    LLP
    F-3




---



##### Table of Contents



MILESTONE
    SCIENTIFIC INC.BALANCE SHEETDecember 31, 2007
  ASSETSCurrent Assets:Cash and cash equivalents

$
745,003Accounts receivable, net of allowance for doubtful accounts of
    $5,000


346,347Royalty receivable


15,358Inventories


1,636,744Advances to contract manufacturer


1,192,584Prepaid expenses and other current assets


169,727Total current assets


4,105,763Investment in distributor, at cost


76,319Equipment, net of accumulated depreciation of $284,145


220,808Patents, net of accumulated amortization of $79,498


559,378Other assets


27,297Total assets

$
4,989,565LIABILITIES AND STOCKHOLDERS EQUITYCurrent Liabilities:Accounts payable

$
1,855,835Accrued expenses


201,103Deferred compensation payable to officers


15,833Total current liabilities


2,072,771Long-term Liabilities:Accounts payable-long term


443,847Line of
    credit-net
    of discount of $65,371


934,629Total long-term liabilities


1,378,476Commitments and ContingenciesStockholders EquityCommon stock, par value $.001; authorized
    50,000,000 shares; 11,787,572 shares issued,
    421,306 shares to be issued, and 11,754,239 shares
    outstanding


12,210Additional paid-in capital


58,483,539Accumulated deficit


(56,045,915
)Treasury stock, at cost, 33,333 shares


(911,516
)Total stockholders equity


1,538,318Total liabilities and stockholders equity

$
4,989,565     F-4




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##### Table of Contents



MILESTONE
    SCIENTIFIC INC.
    STATEMENTS OF OPERATIONS
    YEARS ENDED DECEMBER 31, 2007 AND 2006  2007


2006Product sales, net

$
6,262,608


$
5,566,425Royalty income


128,105



277,752Total revenue


6,390,713



5,844,177Cost of products sold


2,898,048



3,002,615Royalty expense






33,031Total cost of revenue


2,898,048



3,035,646Gross profit


3,492,665



2,808,531Selling, general and administrative expenses


6,335,556



5,326,032Research and development expenses


397,354



1,005,2856,732,910



6,331,317Loss from operations


(3,240,245
)


(3,522,786
)Other income & expenseOther income


552,005



283,107Interest income


17,440



87,411Gain/Loss on disposal of asset


(241,530
)


Interest expense


(19,752
)


Amortize debt issuance


(6,614
)


Total other income


301,549



370,518Net loss

$
(2,938,696
)

$
(3,152,268
)Net loss applicable to common stockholders

$
(2,938,696
)

$
(3,152,268
)Loss per share applicable to common
    stockholders  basic and diluted

$
(0.24
)

$
(0.27
)Weighted average shares outstanding and to be
    issued  basic and diluted


12,141,525



11,788,690     F-5




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##### Table of Contents



MILESTONE
    SCIENTIFIC INC.
    STATEMENT OF CHANGES IN STOCKHOLDERS EQUITY
    YEARS ENDED DECEMBER 31, 2007 AND 2006  AdditionalCommon Stock


Paid-in


Accumulated


TreasuryShares


Amount


Capital


Deficit


Stock


TotalBalance, January 1, 2006


11,758,205


$
11,758


$
57,172,915


$
(49,954,951
)

$
(911,516
)

$
6,318,206Common stock issued for payment of vendor services


53,070



53



57,197











57,250Common stock and options issued for issued for payment of
    consulting services


8,491



9



204,822











204,831Common stock issued for payment of employee compensation
    compensation


80,596



81



135,325











135,406Common shares to be issued in settlement of deferred compensation


129,310



130



149,870











150,000Net loss














(3,152,268
)






(3,152,268
)Balance, December 31, 2006


12,029,672



12,031



57,720,129



(53,107,219
)


(911,516
)


3,713,425Options issued for payment of consulting services










285,282











285,282Common stock issued from exercise of options


66,667



67



71,134











71,201Common stock and options issued for payment of employee
    compensation


28,269



28



185,093











185,121Common shares to be issued in settlement of deferred compensation


84,270



84



149,916











150,000Warrants issued in connection with Line of Credit










71,985











71,985Net loss













$
(2,938,696
)






(2,938,696
)Balance, December 31, 2007


12,208,878


$
12,210


$
58,483,539


$
(56,045,915
)

$
(911,516
)

$
1,538,318     F-6




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##### Table of Contents



MILESTONE
    SCIENTIFIC INC.
    STATEMENTS OF CASH FLOWS
    YEARS ENDED DECEMBER 31, 2007 AND 2006  2007


2006Cash flows from operating activities:Net loss

$
(2,938,696
)

$
(3,152,268
)Adjustments to reconcile net loss to net cash used in operating
    activities:Depreciation expense


104,740



95,914Amortization of patents


37,560



22,849Amortization of debt discount


6,614



Common stock and options issued for compensation, consulting,
    and vendor services


620,403



547,487Bad debt expense (recovery)


69,378



(10,846
)Loss on disposal of equipment


241,530



Loss on write-off of patent rights


157,640



Changes in operating assets and liabilities:(Increase) decrease in accounts receivable


(69,106
)


11,292Decrease in royalty receivable


44,749



125,595(Increase) decrease in inventories


(313,406
)


48,016(Increase) to advances to contract manufacturer


(114,713
)


(58,208
)(Increase) decrease to prepaid expenses and other current assets


(72,654
)


12,618(Increase) decrease in other assets


(13,144
)


10,044(Decrease) increase in operating liabilities:Increase in accounts payable


1,103,575



688,063(Decrease) increase in accrued expenses


(30,973
)


8,726Increase in deferred compensation


15,833



Net cash used in operating activities


(1,150,670
)


(1,650,718
)Cash flows from investing activities:Purchase of equipment


(107,819
)


(18,878
)Payment for patent rights


(227,825
)


(62,967
)Net cash used in investing activities


(335,644
)


(81,845
)Cash flows from financing activities:Proceeds from exercise of stock options


71,201



Long term borrowing-other


1,000,000



Net cash provided by financing activities


1,071,201



NET DECREASE IN CASH AND CASH EQUIVALENTS


(415,113
)


(1,732,563
)Cash and cash equivalents at beginning of year


1,160,116



2,892,679Cash and cash equivalents at end of year

$
745,003


$
1,160,116Supplemental disclosure of cash flow information:Interest expense paid in cash

$
10,000


$
Income tax paid

$
1,925


$
2,337     F-7




---



##### Table of Contents



MILESTONE
    SCIENTIFIC INC.
  NOTES TO
    FINANCIAL STATEMENTS
  NOTE A 
    ORGANIZATION,
    BUSINESS AND BASIS OF PRESENTATION  The Wand CompuDent Wand Plus and STA
    (Single Tooth Anesthesia) CompuMed. CompuDent CompuMed Wand Plus
        NOTE B 
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
  1.
    Cash and
    Cash Equivalents   F-8




---



##### Table of Contents



MILESTONE
    SCIENTIFIC INC.
  NOTES TO
    FINANCIAL STATEMENTS
  2.
    Royalty
    Receivable  Ionic White
  3.
    Product
    Return and Warranty    4.
    Inventories  (first-in,
  5.
    Equipment    6.
    Investments    7.
    Patents    8.
    Impairment
    of Long-Lived Assets   F-9




---



##### Table of Contents



MILESTONE
    SCIENTIFIC INC.
  NOTES TO
    FINANCIAL STATEMENTS
  9.
    Revenue
    Recognition  set-up
    10.
    Shipping and
    Handling Costs    11.
    Research and
    Development    12.
    Advertising
    Expenses    13.
    Income Taxes    14.
    Basic and
    diluted net loss per common share   F-10




---



##### Table of Contents



MILESTONE
    SCIENTIFIC INC.
  NOTES TO
    FINANCIAL STATEMENTS
    15.
    Use of
    Estimates    16.
    Fair Value
    of Financial Instruments    17
    Accounting
    for Stock-Based Compensation  Share-Based Payment
    December 31,2007

2006Volatility

96%

118%Risk-free interest rate

4.97%

4.6%Expected life

3 years

4 yearsDividend yield

0%

0%   No. 96-18
 F-11




---



##### Table of Contents



MILESTONE
    SCIENTIFIC INC.
  NOTES TO
    FINANCIAL STATEMENTS
      18.
    Concentration
    of Credit Risk  CompuDent
    19.
    Recent
    Accounting Pronouncements      Accounting for
    Certain Hybrid Financial Instruments  an amendment of
    FASB Statement No. 133 and 140
 F-12




---



##### Table of Contents



MILESTONE
    SCIENTIFIC INC.
  NOTES TO
    FINANCIAL STATEMENTS
    The Fair Value
    Option for Financial Assets and Financial
    Liabilities  Including an amendment of FASB Statement
    No. 115.
  Summary
    No. 141 (revised 2007)
  Non-controlling
    Interest in Consolidated Financial Statements- and amendment of
    ARB No. 51.
  NOTE C 
    INVENTORIES    Finished Goods

$
1,421,050Component parts and other materials


215,694$
1,636,744     NOTE D 
    ADVANCES
    TO CONTRACT MANUFACTURER   F-13




---



##### Table of Contents



MILESTONE
    SCIENTIFIC INC.
  NOTES TO
    FINANCIAL STATEMENTS
  NOTE E  
    EQUIPMENT
    Leasehold improvements

$
22,317Artwork


85,550Office furniture and equipment


99,839Trade show displays


57,463Computers and software


163,653Tooling equipment-STA


12,377STA Trials Units


63,753Total


504,952Less accumulated depreciation & amortization


(284,144
)$
220,808     NOTE F 
    PATENTS    NOTE G 
    INVESTMENT
    IN DISTRIBUTOR    NOTE H 
    LINE OF CREDIT
   F-14




---



##### Table of Contents



MILESTONE
    SCIENTIFIC INC.
  NOTES TO
    FINANCIAL STATEMENTS
  NOTE I 
    STOCKHOLDERS EQUITY
  ISSUANCES OF
    COMMON STOCK
                  OUTSTANDING
    WARRANTS
      SHARES
    RESERVED FOR FUTURE ISSUANCE
      AGREEMENTS
    TO ISSUE COMMON STOCK AND STOCK OPTIONS
   F-15




---



##### Table of Contents



MILESTONE
    SCIENTIFIC INC.
  NOTES TO
    FINANCIAL STATEMENTS
      NOTE J 
    STOCK
    OPTION PLANS        WeightedAverage


AggregateWeighted


Remaining


IntrinsicNumber


Average


Contractual


Optionsof Options


Exercise Price


Life (Years)


ValueOutstanding, January 1, 2007


427,834



1.85



3.34



Granted


80,000



1.68



4.50



Exercised


(66,667
)


1.07







Forfeited or expired


(49,833
)


2.54







Outstanding, December 31, 2007


391,334



1.86



2.85


$
108,800Exercisable, December 31, 2007


314,334



1.94



2.54


$
98,350   F-16




---



##### Table of Contents



MILESTONE
    SCIENTIFIC INC.
  NOTES TO
    FINANCIAL STATEMENTS
  WeightedWeighted


AverageNumber


Average


Grant Dateof Options


Exercise Price


Fair ValueVested OptionsOutstanding at beginning of period


277,167


$
2.05Exercised


(66,667
)

$
1.07Vested Options


121,445


$
1.59Forfeited


(17,611
)

$
2.54Outstanding at end of period


314,334


$
1.94NONVESTED OPTIONSNonvested at beginning of period


150,667


$
1.49


$
0.78Granted


80,000


$
1.68


$
1.11Vested


(121,445
)

$
1.59


$
1.08Forfeited


(32,222
)

$
1.74


$
0.89Nonvested at end of period


77,000


$
1.56


$
1.00       WeightedWeighted


Average


AggregateAverage


Remaining


IntrinsicNumber


Exercise


Contractual


Optionsof Options


Price


Life (Years)


ValueOutstanding, January 1, 2007


522,466



3.51







Granted


125,000



1.77







Exercised














Forfeited or expired


(8,333
)


4.92







Outstanding, December 31, 2007


639,133



3.15



2.56


$
20,667Exercisable, December 31, 2007


514,133



3.49



2.19


$
1,667   F-17




---



##### Table of Contents



MILESTONE
    SCIENTIFIC INC.
  NOTES TO
    FINANCIAL STATEMENTS
  WeightedAverageNumber


Exerciseof Options


PriceVested OptionsOutstanding at beginning of period


310,910


$
3.43Exercised






Vested Options


203,223


$
3.61Expired






Outstanding at end of period


514,133


$
3.49NONVESTED OPTIONSNonvested at beginning of period


211,556


$
3.63Granted


125,000


$
1.77Vested


(208,778
)

$
3.61Forfeited


(2,778
)

$
4.92Nonvested at end of period


125,000


$
1.77     NOTE K 
    EMPLOYMENT CONTRACT AND DEFERRED COMPENSATION
       F-18




---



##### Table of Contents



MILESTONE
    SCIENTIFIC INC.
  NOTES TO
    FINANCIAL STATEMENTS
    NOTE L 
    INCOME
    TAXES      2007Current AssetsAllowance for doubtful accounts

$
2,000Inventory allowance


40,000Inventory written off but not disposed of


206,000Warranty reserve


10,000Deferred compensation


Subtotal


258,000Valuation allowance


(258,000
)Current deferred tax asset

$
Non-current assetsNet operating loss carryforward

$
18,000,000Valuation allowance

$
(18,000,000
)Non-current deferred tax asset

$
         Accounting for
    Uncertainty in Income Taxes, an interpretation of FASB Statement
    No. 109
 F-19




---



##### Table of Contents



MILESTONE
    SCIENTIFIC INC.
  NOTES TO
    FINANCIAL STATEMENTS
  de-recognition,
  NOTE M 
    PRODUCT SALES AND SIGNIFICANT CUSTOMERS
    Year End December 31,2007


2006CompuDent

$
718,230


$
1,461,692STA Units


1,319,278



Handpieces


3,972,998



3,815,641STA Handpieces


202,291



Other


49,811



289,092$
6,262,608


$
5,566,425United States

$
4,593,656


$
4,147,281Canada


516,635



309,450Other foreign


1,152,317



1,109,694$
6,262,608


$
5,566,425   STA CompuDent
  STA CompuDent CompuMed
   F-20




---



##### Table of Contents



MILESTONE
    SCIENTIFIC INC.
  NOTES TO
    FINANCIAL STATEMENTS
  Ionic
    White
  NOTE N 
    COMMITMENTS AND OTHER
  (1)
    Lease
    Commitments      Year Ending
    December 31,2008

$
98,2402009


52,2942010


7,3042011


6,2642012


522$
164,624     (2)
    Contract
    Manufacturing Arrangement  CompuDent CompuMed The Wand The Wand
    (3)
    Other
    Commitments  SafetyWand CompuFlo, CompuDent
 F-21




---



##### Table of Contents



MILESTONE
    SCIENTIFIC INC.
  NOTES TO
    FINANCIAL STATEMENTS
    CoolBlue Ionic White
  Single Tooth
    Anesthesia (STA) System CompuDent STA System CompuDent
  (4)
  (5)
    Other
    Income    NOTE O 
    PENSION PLAN
   F-22